Artificial Intelligence (AI) is starting to have the capabilities to improve both financial reporting and auditing. However, both companies and audit firms will only realize the benefits of AI if their people are open to the information generated by the technology. A new study forthcoming at Review of Accounting Studies attempts to understand how financial executives perceive and respond to the use of AI in both financial reporting and auditing.
In an article titled “How do Financial Executives Respond to the Use of Artificial Intelligence in Financial Reporting and Auditing?” researchers surveyed financial executives (e.g., CFOs, controllers) to assess their perceptions of AI use in their companies’ financial reporting process, as well as the use of AI by their financial statement auditor. The study is authored by Cassandra Estep from Emory University, Emily Griffith of the University of Wisconsin, and Nikki MacKenzie from Georgia Tech.
“We were curious about how financial executives would respond to AI-generated information as we often hear how the financial statements are a joint product of the company and their auditors. While we find that financial executives are rightfully cautious about the use of AI, we do not find that they are averse to its use as has been previously reported. In fact, a number of our survey respondents were excited about AI and see the significant benefits for their companies’ financial reporting process,” says MacKenzie.
We often hear how AI will take over our jobs, especially in accounting. However, the survey results indicated a perception among executives that AI will augment and not replace humans. Specifically, the executives in the survey stressed how the “human element” of decision-making is critical when AI is employed by companies.
The study then used an experiment to investigate how financial executives resolve audit adjustments when AI is used by their company to generate the fair value of a patent asset and by their auditor in assessing the fair value of that same asset.
“Our experiment found that when both parties were using advanced technology like AI, financial executives were more receptive to the auditor also using AI. Executives were more likely to accept the auditor’s adjustment for the value of the patent on their balance sheet,” reports MacKenzie. When executives were placed in an experimental condition where their own company employed humans to value the asset, they were more resistant to the audit adjustment that arose from the auditor’s own use of AI to value the patent.
“We think this is informative as it highlights the importance of considering the technology used by both parties. This could potentially have impacts for other professions like consultants when they are going to clients with differing levels of technology and how receptive the client will be to their suggestions,” notes MacKenzie.
MacKenzie concludes, “Both companies and audit firms are investing heavily in AI. It is reasonable for everyone to have some caution but the more we can integrate AI into our tasks, it should help us all be more efficient and effective at our jobs. I also think our findings are really encouraging and supports the idea that accounting is here to stay. We aren’t being replaced; our job function may just be changing. Hopefully this encourages and excites the next generation to pursue accounting knowing their job isn’t going to be replaced and that they will get to use these advanced technologies on the job.”